Investing Strategies for Optometrists – Stocks

Many healthcare professionals find themselves responsible for their own retirement funding.

In many other types of careers, pensions and/or 401Ks with some degree of matching contributions from employers are commonplace. The same is typically not true for the optometrist. Saving and building your own retirement fund therefore becomes a necessity. There are countless avenues of investing strategies for optometrists and other healthcare professionals.

This series of articles serves as a very simple investing guide to help highlight few of the many investments available to help secure financial wealth well into your future.

Disclaimer: This article is in no way a recommendation to buy or sell any stock mentioned. These are only my personal opinions about investing, not companies I have any financial interest in. If you want professional financial advice, please seek the help of a trained professional. I mention specific companies in this article, but only because we are familiar with them since we are all eye care professionals. It serves as a reference, not a recommendation. Remember – this is NOT financial advice.

Investing in the stock market is always a good first step into creating financial wealth and growth.

A stock is a share of ownership in a company. These shares can be bought and sold. When you purchase a share of stock, you become a part owner of the company, or a shareholder. The company is therefore owned by all the shareholders.

As the value of the company increases or decreases, so does the value of your shares in the company.

For example: If you were to purchase a share of X company for $50.00, and the company grows and increases their revenue and earnings over the course of a year, then as a result, your share of X company will likely be worth more than the original $50.00 you paid for it. It may be worth $55.00, which means your original $50.00 investment has grown $5.00 over the course of a year due to the success of the company as a whole. The opposite is also true if the company finds itself in financial trouble, or in a state of decreasing revenue and growth. If the opposite is true, your share of the company can be worth $40.00 after a year, or your original investment worth less than the $50.00 you originally paid. As such, it is important to know that stocks always pose a risk to your finances, but can also offer great reward.

One of the keys to investing in the stock market is to know that money is never lost or gained until a stock is actually sold.

In other words, if you purchase a share of X company on January 1st, 2015, at a price of $50.00, even if that share is worth $1,000.00 on March 1st, 2015, you have not made any money on your investment (or lost any money depending on alternate circumstances) unless you sell or relinquish ownership of your stake in the company. This is an important lesson because the value of a company can fluctuate wildly on a daily basis, a monthly basis, and obviously a yearly basis. Investing at a young age is extremely advantageous because it allows your initial investments time to grow as the economy grows. In addition, if the company you purchase a stake in has a less than favorable year, and the value of your shares decline, you are also afforded time for the company to turn itself around and recoup its value.

So why invest in the stock market if there is such high risk, and your investments can depreciate?

In general, stocks have stood the test of time and provided solid investment opportunities. As the economy grows, so does the valuation of companies and subsequently their shares. As companies increase profits and enjoy greater earnings, so do their shareholders.

“Since 1926, the S&P 500 (a stock market index made up of 500 large companies used to track overall health of the stock market) has produced an annualized total return (including capital gains and reinvested dividends) of 6.6 percent, after inflation. Those 86 years include the 1929-32 free-fall (when the Dow lost about 90 percent), the years just before World War II (when it fell by half), and the doldrums of 1966-81, when stocks were essentially flat.”1

A general rule of thumb has been that you can expect to earn around 7% a year on average in stocks. Considering retirement is something 30-40 years away for many of us, this is a good allotment of time to watch your investments grow.

While past performance is no indication of future success, it is difficult to argue with history.

Key facts to know about stocks:

The stock market is a conglomerate of individual stocks. The stock market as a whole can move up while a specific stock can trend down and vice versa.

Stocks have historically beat inflation over the course of time, and have provided good investments for long-term goals.

There are many different kinds of stocks spanning all different types of sectors including technology, healthcare, commodities, and real estate.

Stock prices can fluctuate wildly based on domestic and global news or rumors, and investor enthusiasm or skepticism.

There are numerous ways to determine the true value of stock and whether or not it is in line with industry expectations.

A diversified portfolio consisting of different types of stock in different sectors is the best way to protect your financial wealth.

Shares of some of the most successful companies in the world can be bought and sold in the stock market, including many in the ophthalmic industry.

Highlighted below are some companies many of us are familiar with, including their stock price activity over the last five years. It of course comes with a risk!

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author does not have any extensive academic education on the topics mentioned in this article, and writes purely based upon personal experience and knowledge acquired from his own due diligence. These particular companies are mentioned because they are FAMILIAR companies to optometrists, therefore giving perspective on the topic and for no other reason.

A share of AGN purchased on January 8th, 2010 at roughly $60.50 would be worth $212.59 today (data as of January 1st, 2015) excluding dividends.

As you can see, buying stock in various companies and holding for long periods of time can be very financially rewarding.

Despite periods of market downturn and economic turmoil, the overall long term trend is growth and increased share price. Purchasing stocks to hold in your brokerage account, IRA, or Roth IRA (more on that later) can help fund your retirement in your twilight years. Adding income generated from dividends with compounding interest over time, can provide a wealth of passive income.

Stay tuned for more information on dividends and DRIP accounts, IRAs, Roth IRAs, and other savings avenues in the future. In the meantime, get the discussion rolling, feel free to ask any questions regarding content within this article, or areas of financial and investment avenues you would like more information on.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author does not have any extensive academic education on the topics mentioned in this article, and writes purely based upon personal experience and knowledge acquired from his own due diligence.

About Antonio Chirumbolo

Antonio Chirumbolo, OD, is Associate Director of Marketing at CovalentCareers. Antonio's focus is in the world of digital publications and healthcare marketing, with special attention on content creation, management, and development.

2 comments

Dr. Chirumbolo I really like this article because of it’s a great basic introduction to why new grads should even invest to begin with. I think it’s financially responsible for new grads to worry about the “liabilities” of their life i.e. student debt and I think this article helps students/new grads to focus on the “assets” of their lives. We get little training/education on how to have our “money make us more money”. Investing is a great way to do that and I appreciate you writing out this article. Perhaps we could get an article on the basics of investing next?

Hi Dr. Do, I can’t agree with you more. I first started learning about the stock market and investing from a classmate in the first year of optometry school. Soon, a few other classmates with interest in investing joined us and it wasn’t long until there were about 6 of us sitting next to eachother in lecture hall with Google Finance running on our laptops while trying to take notes on the actual class material! In any event, yes, investing early on is so critical to building wealth. Compounding interest and Driping dividends into more shares is a sure way to build great wealth when you do it EARLY in life. I think that is the key there. After you graduate, like you said, we are so worried about all these expenses and paying back loans (which obviously is very important) that we forget it is important for us to invest in our futures as well. Because in our profession, retirement funding and pensions aren’t the norm.

I’ll be honest I never got formal training on money management, and it was all learned on my own time and from reading articles and blogs and investing forums, but it is the single most important thing I’ve done.

I definitely have more investing articles in the pipeline and would be open to writing about anything specific you had in mind. Maybe I can share my own Roth IRA portfolio (Roth IRA is SUCH an important investing tool EVERYONE should utilize if possible) in an article as well.

Thanks for reading and thanks for the feedback! Not sure if you are active in the stock market, but definitely some great ophthalmic companies in there that we as a profession are familiar with. When you know a lot about what a company does, produces, and what audience they capture, investing in them is a much easier decision to make!